Budget Cuts May Loom For Nn

December 17, 1989|By MARK DAVIDSON Staff Writer

NEWPORT NEWS — A declining rise in revenues, a sluggish real estate market and higher debt payments are expected to face city officials drafting a budget for next fiscal year, City Council members were told Saturday.

"I am not looking at this as gloom and doom at all," Vice Mayor Joe S. Frank said after a special day-long meeting at the Hilton Inn-Kingsmill in James City County. "But I don't want to be foolhardy either. If we are not going to raise taxes, we are going to have to make substantial cuts."

Budget Administrator John Hartman outlined a "very preliminary" financial picture for the budget year that begins July 1; it was the first look at financial estates for that budget that council members have received.

Hartman said income from taxes and other sources will rise by around $15 million over what is projected for the current year.

While that may sound good, Hartman said he doubts seriously that increase will come close to matching the rise in what it will cost to operate the city at current service levels.

Last year, for instance, revenues rose $21 million over the previous year and the council still raised the real estate tax rate by 6 cents - to $1.15 per $100 of assessed value. Half of that increase was needed just to balance the budget.

Several council members have said they don't want to raise the tax rate again next year if they can instead make budget cuts that won't seriously affect services.

While no specifics were discussed Saturday, two council members suggested freezing capital improvements for one year.

The city pays for most capital improvements - such as street repairs, public buildings and sewers - by borrowing money.

This allows it to spread the payments for those improvements over many years and even out the tax hikes needed to pay for them. Repeated borrowing has caused the city's debt level to rise.

Councilmen Barry DuVal and Donald Patten said financing only capital projects that are under way and not starting any new ones for a year might help bring the debt down and therefore keep expenses under control.

"I think that's something we should seriously consider," DuVal said.

To compound the city's budget woes, council members were told the city needs to do a better job of saving money - known in budget jargon as building reserves.

Currently, the reserves are about $7.8 million, or 4.3 percent of the total operating budget. Hartman said it's desirable to have a 5 percent reserve level because it makes the city a better risk for loans.